LIQUIDATION BY INSTALLMENT

PROBLEM 1

The balance sheet of the firm of R, S, J just before liquidation shows the following:

Assets P120,000

Liabilities 50,000
R, loan 10,000
R, capital 22,000
S, capital 30,000
T, capital 8,000
Total P120,000

R, S, and T share profits 5:3:2 respectively. Certain assets are sold for P80,000. Cash of P10,000 is withheld
pending future developments.

1. How much cash is to be distributed to the partners?

2. R, S, and T share profits 43%, 22%, and 35% respectively.
a. How much cash is to be distributed to R?
b. How much is the total possible loss absorbed by S?

PROBLEM 2

The balance sheet of the firm of A, B, C, and D just prior to liquidation shows:
A, loan P1,000
A, capital 5,500
B, capital 5,150
C, capital 6,850
D, capital 4,500
A, B, C, and D share profits 4:3:2:1 respectively. Certain assets are sold for P6,000 and this distributed to partners.

1. How much cash should C receive?

2. What if A, loan has debit balance?
a. How much cash should D received?
b. How much is the total cash received by partners?

PROBLEM 3

Partners DD, EE, FF, and GG share profits 50%, 30%, 10%, and 10%. Accounts maintained with partners just prior to
liquidation follow:

Advances Loans Capitals

(Dr. Balances) (CR balances) (CR Balances)
DD P5,000 P40,000
EE 10,000 30,000
FF P4,500 15,000
GG 2,500 25,000
At this point P18,000 is available for distribution to the partners.

1. How much cash is to be distributed to GG?

2. How much cash received by EE?
3. How is the total payment received by EE, FF GG?

PROBLEM 4

The following balance sheet was prepared for the Tan, Lim and Wan Partnership on March 31, 2018.

Assets Liabilities
Cash P 25,000 Liabilities P 52,000
Other Assets 180,000 Tan, capital (40%) 40,000
Lim, capital (40%) 65,000
Wan, capital (20%) 48,000
Total Assets P 205,000 Total Liabilities & Capital P 205,000

The partnership is being liquidated by the sale of assets in installments. The first sale of non-cash assets having a
book value of P 90,000 realizes P 50,000.

1. How much cash should Tan received?

2. If P3,000 cash is withheld for possible liquidation expenses.
a. How much cash should Wan receive?
b. How much is the capital balance before cash distribution of Lim?

Problem 5

D, E, and F share profits in 50%, 30%, and 20% respectively. Their capital accounts prior to liquidation (which is expected
to result in substantial gains) are as follows:

D P 18,000
E P 27,000
F P 3,000

The partners wish to distribute cash as it becomes available so that the capital accounts may be brought into the
profit and loss ratio as rapidly as possible.

1. Who is the partner to receive the first available cash and up to how much?
2. How much is the total payment to E?
3. How much is the total payment to D?

PROBLEM 6

Capital and loan balances for A, B, and C who share profits 2:2:1, are as follows just before liquidation:

A, loan P 10,000
A, capital 15,000
B, loan 5,000
B, capital 30,000
C, loan 10,000
C, capital 10,000

1. Assuming that cash of P12,000 is available as a first distribution to partners, how much cash is to be distributed to C?
2. How much cash is to be distributed to B?
3. How much is the loss absorption balance of all partners?
Comprehensive Illustrative Problem

R, S, and T are partners who share profits and losses as follows: R, 50%; S, 30%; T, 20%. All partners are personally
insolvent. On December 31, 2018, they agree to liquidate their partnership. The firm’s balance sheet on this date is as
follows:

R, S and T
Balance Sheet
December 31, 2018

Assets Liabilities and Capital

Cash P 5,430 Accounts payable - trade P 12,892
Other assets 61,870 R, loan 8,000
Total Liabilities 20,892

R, capital P 16,402
S, capital 5,469
T, capital 24,537 46,408
Total Assets P 67,300 Total Liabilities and Capital P 67,300

The following data relate to the realization of other assets:

Book Value Cash Loss Cash Liquidation Unrecorded
Realized Withheld Expenses Paid Liabilities Paid
January P 24,700 P 20,120 P 4,580 P 3,000 P 1,200 P 1,550
February 33,170 21,000 12,170 800 1,400 200
March 4,000 3,700 300 -- 200 --

Required:
1. Statement of liquidation by installment
2. Computation of safe payments